California’s Home Insurer of Last Resort Sees 74% Jump in Policy Numbers

California homeowners are “flocking” to the state’s FAIR Plan. And whether they come because they simply can’t buy coverage anywhere else or because their lower-risk location qualifies them for cheaper rates, the spike in numbers doesn’t bode well for the state’s insurance industry.

The FAIR Plan’s number of active policies grew by 74% in just 18 months, leaving it with $599 billion of insured risk and the potential inability to pay claims if something catastrophic occurs.

“Whether they’re non-renewed by their prior carrier, or they bought a new home, the [home insurance] options are very limited out there,” Victoria Roach, president of the California FAIR Plan, told the state’s Assembly Standing Committee on Insurance during an oversight hearing in May. “So the state of the industry has put us in the place where people are, for lack of a better term … flocking to us.”

Roach stressed that the FAIR Plan is designed to be a temporary solution for homeowners who can’t find coverage elsewhere. With home insurance prices in California continuing to increase and more insurers either limiting new policies or ceasing them altogether, more homeowners are finding it difficult to buy affordable coverage.

But instead of using the FAIR Plan’s coverage as a short-term “crutch” until they can get back on their feet with a standard insurer, homeowners are staying on the plan for years. And those in areas with the lowest risks tend to stay on the plan the longest because their premiums are cheaper than what they might find in the standard market, Roach said.

FAIR Plan growth means greater risks for all

As of March 2025, the California FAIR Plan had 573,739 policies in force — an increase of 23% since September 2024. The total also marks a 74% increase since September 2023 and a 139% increase since September 2021.

Severe weather and wildfires continue to push new policyholders to the plan.

All insurers that sell property insurance in California must participate in the FAIR Plan. The plan issues fire insurance policies on behalf of participating companies. Member insurers share in the FAIR Plan’s losses, profits, and expenses based on their share of the California property insurance market.

Following the January 2025 wildfires in Los Angeles County, the FAIR Plan received more than 5,000 claims. So far, it’s paid out more than $2.7 billion to policyholders for the Palisades and Altadena fires.

Earlier this year, the FAIR Plan won approval from the state’s insurance commissioner to levy a $1 billion special assessment on its member insurance companies. And insurers can pass $500 million of that assessment on to policyholders in the form of temporary supplemental fees, Commissioner Ricardo Lara said.

Temporary coverage turned long-term drains FAIR Plan coffers

The California FAIR Plan is an option for residents who can’t secure property insurance in the state’s private market. It provides limited coverage with a $3 million cap.

Coverage typically costs more than private coverage options since the FAIR Plan largely insures higher-risk properties. But, Roach told the assembly committee, some homeowners are seeking quotes from the FAIR Plan even when they don’t need to.

“We’ve had brokers tell us customers will say to them, ‘We’ll quote the FAIR Plan because I heard that they’re lower priced,’” she said. Properties with a lower risk of wildfire will likely get a rate quote that’s “substantially” lower-priced than the standard home insurance market, Roach said.

And both policyholders who truly need FAIR Plan coverage and those who could likely find standard coverage are staying on the FAIR Plan for longer than intended, she explained.

“At the end of 2023, our average [policyholder] had been with us about five and a half years,” Roach said. Among policyholders in lower-risk areas, “we find that the tenure there is closer to seven years.”

In 2024, the insurer’s policy count grew 40%, and its exposure — the total amount it insures — ballooned 60%.

“At the end of March, we [were] at close to 575,000 policies and close to $600 billion in exposure,” Roach said. “And the growth just keeps going.”

The FAIR Plan’s inability to refuse coverage or force policyholders to seek other options is contributing to the growth, plan representatives said. Like other state FAIR Plans, California’s insurer of last resort has a depopulation program that’s supposed to move policyholders back to the private market as their ability to find standard insurance improves.

“The FAIR Plan of the day does not have a direct mechanism to simply tell people ‘Get off the FAIR Plan’ — with limited exceptions,” said Armand Feliciano, a public and private policy expert who also addressed the committee. “The bottom line is the FAIR Plan rates cannot be lower than the private market. Otherwise, depopulation is going to be hard. Why would you leave the FAIR Plan if you’re paying $2,800 average in the low-[risk] areas?”

What’s next? Can the FAIR Plan keep up with the demand?

The FAIR Plan has added more than 250 new employees, including desk examiners, field examiners, and customer service representatives, to account for continued growth. But the rapid growth is further straining the FAIR Plan’s already limited resources.

“We don’t have a lot of money at this point,” said Roach in the same legislative session. “When fire season really gets going, we’re praying for a mild season, because if we have another large event or several small events, we could be in assessment territory really quickly.”